What fails your sniff test re any arbitrary loan?

So what proportion of new listings make it past your filters then? My guess is not very many. I tend to the other approach of bidding on most things to a modest extent, but only down to a rate I know I can move on quickly on the SM if I want to. When I find that bids have been successful (not often these days!), I then decide how long to keep it (and how much) based on the information provided. Otherwise I'd spend endless hours doing pointless DD on loans I'm never going to own.

If you want to sell me a loan

1) no restaurants
2) no aircraft
3) no trucks
4) no borrowing beyond 2x profit
5) no multiple loans (the third to do the same as the first two)
6) no 60 month loan to deal with a 6 month cash flow problem
7) no tax bill (has your accountant been sacked yet?)
8) no multiple business owner with high net worth who has a cash flow problem
9) nothing that is written badly, spelling or just doesn't explain what a business does or why it needs what it does
10) nothing that suggest the director has a hobby, special girlfriend, cross subsidised business interests which will suck out the money
11) no golf courses
12) no farming
13) no building change that needs planning permission as yet unreceived
14) no pawn based on >70% LTV at retail not scrap value
15) no art!
16) no low margin businesses with invoice factoring (duh)
17) poor credit history (probably the most important)
18) no mummy and daddy is giving the business to the kid, who has great experience running a different business and just needs a little help along with his uncle who went bust yesterday and needs a job and will do what he is told, honestly, and by the way mummy and daddy will continue to hold all the purse strings and take consultant's fees and may move all the assets somewhere else if things go wrong.
19) no busy fools (ie T/O £8M, profit £50k, multiple stuff)

I worry if the issue is a recovery due to recent CEO loss (insurance guys)....

but on the positive
1) secure government based income streams
2) waste management (muck->brass)
3) retail with at least 10 years life and unique selling proposition
4) pawn with LTV<70% at retail
5) 10% as an average objective after fees and a default margin, though will drop down way below this figure to keep on the 10% average.

For me:
1) Companies with Solutions in their name
2) Loans with punny titles like "Copper load of this"
3) Loans to repay other loans (FC or otherwise)

I'm happy with 12 month tax loans though, after all only profitable companies pay tax.

LOL

Oh yes

You do have to focus a bit but I guess I have made loans to some 250-300 organisations in the last 9 months using 5 portals and so far three have approached some sort of default with two sold off at a premium and one in admin (assets now sold and awaiting final decisions but looking like I will get the capital back).

Generally, I'd tend to see the loans nominally to pay tax, and the loans nominally to pay for "working capital" as essentially the same.

Suppose that a company has a tax bill of around £20k, and current working capital that they intend to use for other purposes in excess of £20k.

They get a loan for £20k and pay the tax bill, then go on to spend the £20k that they would otherwise have been obliged to use on the tax bill for the purposes they had already earmarked it.

Do they describe the loan as "for the tax bill" because that's what they actually did with that tranche of money, or as "for working capital" (or even some more specific plan), because that's what they'd have to forego if they didn't get the loan approved?


Except for asset purchase transactions (where the loan advance will be paid directly to a supplier, and legal title to the asset comes to the lenders), I'd see the stated loan purpose as largely irrelevant "fluff" - you're making a loan to a business for it to use as it sees fit, and as part of the process the business can identify at least one expense that the loan can be taken as being nominally "for the purpose of".

If a business were in such dire straits that a decline on the loan application would leave them physically unable to pay the tax bill by any other means, we probably shouldn't be lending to them ... but I would hope such businesses wouldn't make it through to the website.

I dislike when profits repeatedly disappear out of the Ltd Company or partnership ... while they maintain a scary overdraft or some other sketchy balancing act... then use a From Chumps unsecured loan to finance their next great idea.